U.S. judge rules PDVSA's 2020 bonds are valid, Citgo still protected

The corporate logo of the state oil company PDVSA is seen at a gas station in Caracas, Venezuela, August 30, 2017. REUTERS/Andres Martinez Casares/Files

CARACAS (Reuters) - A U.S. judge on Friday ruled that Venezuelan state oil company Petroleos de Venezuela’s [PDVSA.UL] 2020 bonds are “valid and enforceable,” a court document showed, in a setback for opposition leader Juan Guaido.

In a statement Friday afternoon, Guaido’s team said it would consider appealing the decision, calling the issuing of the bonds “absolutely fraudulent.”

The bonds are backed by half of the shares in the parent company of U.S. refiner Citgo Petroleum Corp [PDVSAC.UL], and Guaido’s team had sued last year to declare them invalid on the grounds that the Venezuelan government had issued them without the approval of the opposition-held National Assembly.

But the ruling does not pave the way for creditors to immediately seize shares in Citgo’s parent. The U.S. government has used its sanctions on Venezuela, aimed at ousting President Nicolas Maduro, to prevent bondholders from taking such action through at least January 2021.

Guaido’s team took control of Citgo last year after he was recognized by the U.S. government as Venezuela’s rightful leader on the grounds that Maduro rigged his 2018 re-election. Guaido’s overseas representatives stopped making payment on the 2020 bonds last year.

Maduro, labeled a dictator by the opposition and dozens of countries, has accused Guaido of seeking to “steal” Citgo.

On Friday, U.S. District Judge for the Southern District of New York Katherine Polk Failla ruled that “a default has occurred” on the bonds, dismissing Guaido’s argument they were not valid.

Guaido’s team said the Venezuelan state should comply with all its “legitimate obligations.”

“There should be an organized debt evaluation and restructuring...which will be possible after a transition to democracy,” the statement read.

Reporting by Vivian Sequera in Caracas and Luc Cohen in New York; Editing by Sonya Hepinstall